European Union energy ministers on Friday gathered in Brussels for emergency talks on how to protect households and businesses from runaway gas and electricity prices ahead of winter.
European Commission President Ursula von der Leyen sought to lay the groundwork for Friday’s meeting with a five-point plan. This includes a price cap on Russian gas, a windfall tax on fossil fuel profits, a mandatory target for reducing electricity use and emergency credit lines for power companies.
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Russian President Vladimir Putin responded to the proposals by threatening to rip up existing supply contracts if a cap on Russian energy exports is imposed, warning that he was prepared to let Europe “freeze” during the colder months.
Russian Foreign Ministry spokeswoman Maria Zakharova on Friday reportedly warned that the West failed to understand how energy price caps could impact their own countries. “The collective West does not understand: the introduction of a cap on prices for Russian energy resources will lead to a slippery floor under its own feet,” Zakharova said, according to Reuters.
It is not expected that EU member states will reach a decision on Friday regarding the proposed policy ideas.
The 27-nation bloc has endured a sharp drop in gas exports from Russia, traditionally its largest energy supplier, amid the standoff over the Kremlin’s onslaught in Ukraine.
Imported Russian gas to Europe currently stands at 9%, representing a substantial fall from roughly 40% before the war.
The bitter energy dispute between Brussels and Moscow has recently seen Russia completely halt gas flows via a major supply route to Europe, exacerbating the risk of recession and a winter shortage.
Speaking in Brussels ahead of the talks, EU Energy Commissioner Kadri Simson told reporters that Friday’s meeting was necessary to provide governments with the right tools to address the deepening energy crisis.
“This is not only about prices,” Simson said. “It is also a challenge on the aspect of the security of supply.”
Energy bills have skyrocketed since Russia invaded Ukraine in late February and the West responded with a barrage of punitive economic measures.
Renewables needed ‘faster than ever’
“We are facing an extraordinary situation, not only because Russia is an unreliable supplier, as we have witnessed over the last days, weeks, months, but also because Russia is actively manipulating the gas market,” von der Leyen said in a statement on Wednesday.
“I am deeply convinced that with our unity, our determination, our solidarity, we will prevail,” she added.
EU lawmakers have repeatedly accused Russia of weaponizing energy exports to drive up commodity prices and sow uncertainty across the bloc. Moscow denies using energy as a weapon.
Last week, Russia’s state-owned energy giant Gazprom cited an oil leak for the indefinite shutdown of the Nord Stream 1 gas pipeline, which connects Russia to Germany via the Baltic Sea.
However, the Kremlin has since said that the resumption of gas supplies to Europe is completely dependent on the EU lifting its economic sanctions against Moscow.
“I think what this energy crisis has shown is that we need renewables and the green energy transition faster than ever,” Deepa Venkateswaran, senior analyst of European Utilities at Bernstein, told CNBC’s “Squawk Box Europe” on Friday.
“At this point, renewables have never ever been [this much] cheaper than wholesale prices, which are driven by gas and fossil fuel prices,” she added.
Oil price cap
Speaking alongside French Finance Minister Bruno Le Maire ahead of a separate meeting of EU finance ministers in the Czech Republic, German Finance Minister Christian Lindner called for solidarity across the bloc in the search for solutions to help households and businesses.
“It is a signal that France and Germany starts this meeting together, it is a signal that we are standing shoulder to shoulder not only here but policy-wise as well,” Linder said, jovially nudging France’s Le Maire.
Linder said he would invite all EU member states to support the idea of a price cap on Russian oil.
The G-7 economic powers issued a joint statement last week backing the initiative, although energy analysts remain highly skeptical about the integrity of the proposal.
The Kremlin has warned it would stop selling oil to countries that impose price caps on Russian energy exports.
“We want to avoid higher revenues for Russia and we want to maintain the price level for our economies and one favorable means is the oil price cap. It is more effective when more member states of the European Union support this idea,” Lindner said.